Mapfre has reached an agreement with Caixabank on the insurance business and announced a restructuring of the Spanish business. The compensation to be received by Mapfre for the break-up of the bancassurance alliance with Bankia amounts to 571 million euros. Of the total, 323.7 million euros corresponds to the sale to Caixabank of 51% of Bankia Vida for 110% of the market value (established by an independent expert). Then there are 225 million euros equivalent to 110% of the market value of the Non-Life insurance business, as a consequence of the termination of the distribution agreement with Bankia.
The agreement also includes submitting to an arbitration process Mapfre’s right to receive an additional 10% of the market value of the Life and Non-Life business, amounting to 52 million euros.
This transaction will have a positive impact on net profit of 171 million euros net by 2022 (18% of net profit 2022e R4e) which could be increased by an additional 52 million euros gross pending the arbitration process.
The use of the proceeds will be used to restructure the business and debt:
- Transformation of the business structure in Spain, providing 100 million euros for a new voluntary redundancy programme provisioned in December ’21. This is in addition to the 75 million euros already provided in June. These voluntary redundancy processes are expected to be executed between 2022-23. This will result in cumulative savings of 152 million euros by 2025.
- Transformation of the business model in Italy. Restructuring plan to be quantified.
- Optimisation of debt structure to financial needs: bond buyback offer made in December with a net impact of -9m euros in 2021, and flexibility to adapt the syndicated loan to funding needs. The entity estimates financial cost savings of approximately 9 million euros cumulative until 2025.
Renta 4 analysts’ assessment:
We value positively that an agreement has been reached even though the valuation is below what the market was expecting of 750 million – 1 billion euros. The use of the funds is positive as it seeks to give continuity to the strategy defined by the Group to improve operating efficiency and reduce financial expenses, and thus improve profitability. However, the impact of the announced measures in terms of expected cost savings only represents 2% of operating expenses 2022 R4e in Iberia and 3% in 2023e. Mapfre has also reiterated that it intends to continue investing in the business, analysing both organic and inorganic growth, and to return to the pre-Covid dividend as soon as possible.
